A Global Perspective for Early Care and Education

1
A Global Perspective for Early Care and Education
Child Development Policy InstituteThe Foundation
for Early Education2008 Fall ForumSacramentoOct
ober 21, 2008 Michael MilkenChairman, Milken
Institute
2
Will We Land on the Moon?1954 Gallup Poll
38 We can reach the moon.
62
Not in this century.
3
Can we cure cancer?1957 Gallup Poll
4
Can we cure cancer by 2000?1957 Gallup Poll

• 21
• 41
• 61
• 81

5
Can we cure cancer?1957 Gallup Poll
Not in my lifetime.
19
81
We conquered polio well defeat cancer.
6
Growth of World Population andthe History of
Technology
Population (millions)
Genome Project
Internet
Man Lands on Moon
6000
PCs
High-Speed Computers
NuclearEnergy
Invention of Airplane
5000
Industrial Revolution
2nd Agricultural Revolution
DNA Discovered
Peak of Rome
4000
Peak of Greece
Penicillin
AgriculturalRevolution
3000
Invention of Plow
Automobile
Pottery
1st Irrigation
Telephone
2000
1st Cities
Metallurgy
Germ Theory
Writing
Railroads
Mathematics
1000
Watt Engine
0
-9000
-6000
-3000
-2000
0
1000
2000
-4000
Source Robert Fogel/University of Chicago
7
The Future Belongs to the Educated

• A New International Perspective
• Changing Priorities
• Human Capital The Most Precious Asset
• Education
• Health
• Education is the Answer

8
The Worlds Top 10 Economies(Percent of World
GDP)
Today
2050
1820
China (18.5) U.S. (16.5) India (12.0)
Brazil (4.8) Indonesia (3.5) Japan
(3.1) Mexico (3.0) Russia (2.7) U.K.
(2.3) Germany (2.3)
China (28.7) India (16.0) France (5.4)
England (5.2) Prussia (4.9) Japan (3.1)
Austria (1.9) Spain (1.9) U.S. (1.8) Russia
(1.7)
U.S. (23.6) Japan (8.1) China (6.5) Germany
(6.1) France (4.7) U.K. (4.7) Italy (3.9)
Russia (2.8) Spain (2.7) Brazil (2.7)
Sources World Bank/Angus Maddison, The World
Economy Historical Statistics (OECD)/
PricewaterhouseCoopers/Milken
Institute/Goldman Sachs
9
China
The 1980s View
Todays Reality
10
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11
Hundreds of billions of dollars in excess
liquidity
Singapore
Qatar
Norway
Abu Dhabi (UAE)
Taiwan
Kuwait
12
How will they invest their capital?

• Medical research
• Better medical treatment
• Hospitals and facilities
• Education

13
Education City - Qatar

• 14-square kilometers
• Educational facilities from school age to
  university-level research
• Regional center of educational excellence
• Forge private/public relationships with leading
  businesses

Source Wikipedia
14
Biopolis Singapore 2-million-square-foot
biomedical sciences research complex
15
Researchers Recruited to Biopolis
Japan
Germany
U.S.
U.K.
David Lanep53 gene
Yoshiaki ItoKyoto Univ.
D. Axel UllrichDrug pioneer
NCIs Nancy Jenkins and Neal Copeland
U.S.
U.K.
U.S.
France
Edison Liu Breast cancer
Philippe KourilskyInstitute Pasteur
Alan ColmanCloning
Alex MatterDrug developer
16
The Future Belongs to the Educated

• A New International Perspective
• Changing Priorities
• Human Capital The Most Precious Asset
• Education
• Health
• Education is the Answer

17
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China The WangsJason Wang, 34Olive Zhao,
33Lily Wang, 1
20
China

• Parents spend an average of 15 on their
  childrens education and only 10 on housing.
• 55 of parents in China send their children for
  extra lessons in English.

21
Extracurricular Education
22
By 2025, more Chinese will speak fluent English
than the citizens of all English-speaking nations
combined.
23
India The MattasDheeraj, 31Ranjani,
32Anahita, 5Aadit, 2½
24
In India

• Extracurricular activities consisted of academic
  coaching in 95 of the households.
• 43 of parents want their children to get a
  Masters degree 29 want them to get a PhD.

25
South Korea The KimsKim Yong-seong, 46Han
Jeong-sean, 45Kim Hyun-soo, 17Kim Woo-jin, 15
26
South Korea

• Spend more on education (22) than housing (13)
• 70 of Korean parents expect their children to
  work overseas, of which more than half expect
  their children to work in the US.

27
Declining South Korean Birth Rates
28
Singapore The LeesMichael Lee, 37Lisa Yeoh,
36Sheryl Lee, 8Shaun Lee, 5
29
Singapore

• 90 of people own their own homes, and 60 have a
  mortgage.
• Only 46 have a car.
• 40 want their kids to live abroad.

30
Asian Families Save For
Source CLSA/ Mr Mrs
31
Housing and Education in Asia
Education HousingSouth Korea 640 382Japan 5
17 795Singapore 417 544Taiwan 240 277Hong
Kong 316 434China 51 34
32
Consumer Spending
U.S.
Asia
Housing 32.7 Transportation 18.0 Food 12.8 Insu
rance/pensions 11.2 Healthcare 5.7 Entertainment
5.1 Apparel and services 4.1 Cash
contributions 3.6 Education 2.0 Personal care
products 1.2
Food 23 Education 15 Housing 10 Clothing 8 Oth
er 8 Transportation 6 Healthcare 5 Communicatio
n 5
Source U.S. Bureau of Labor Statistics/CLSA Mr
Mrs Asia
33
Rate-of-Return Concerns
How to Save 1-Million in 40 Years
25,000-a-year _at_ 0 6,642-a-year _at_
6 1,304-a-year _at_ 12 (or a one-time investment
of 10,747)
34
Culture change in America is coming.Our
priorities will change.

• Well spend relatively less on housing, cars and
  other consumables.
• Well spend more on education, medical research
  and building social capital.

35
Culture change in America is coming.Our
priorities will change.
Dining out
Eating at home
Bigger cars
Efficient cars
Larger houses
Smaller houses
36
U.S. Sales of SUVs
millions
10
8
6
4
2
1976
1991
1996
2001
2008est.
1981
1986
2006
Source BEA Auto and Truck Sales, Production,
Exports and Inventories
37
U.S. Hybrid Market Car Sales (1999 2008)
360,000
270,000
180,000
90,000
08
98
99
00
02
04
05
06
07
03
01
38
Average Size of American Houses
square feet
2,469 sq. feet
2,500
2,000
1,500
1,000
1970
1980
1990
2000
2006
Source National Association of Home Builders
39
Home Sizes U.S. vs. Asia
square feet
2,469
2,500
2,000
1,500
1,200
1,000
500
HongKong
Japan
S.Korea
India
China
Singapore
U.S.
Source Mr Mrs Asia - CLSA
40
Larger houses
41
will be replaced by more modest homes.
42
Living in a smaller house cancer free with
well-educated kids sure beats living in a big
house.
43
Consumption will trend higher in China driven by
the younger generation. There is much pent-up
consumption potential. Chinas loandeposit ratio
declined to 65.6 in May 2008 from 133 at the
end of 1989.
44
The Future Belongs to the Educated

• A New International Perspective
• Changing Priorities
• Human Capital The Most Precious Asset
• Education
• Health
• Education is the Answer

45
Berkeley 1964
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PSFti(SHCiSSCiSRAi)
P Prosperity Ft Financial Technology HC
Human Capital SC Social Capital RA Real
Assets
48
Democratization of Capital
Democratization of financial assets
Democratization of industrial assets
Democratization of career opportunities
49
America Goes to WorkU.S. and Fortune 500
Employment
200
U.S. 62 million jobs
180
160
140
120
100
80
Fortune 500 minus 4 million
60
00
95
90
85
80
75
70
Index 1970 100
50
The 21st Century will see an increasing
worldwide competition for human capital.
51
2007 U.S. Household Balance Sheet72 Trillion
Total
Shares and Securities20
Loans1
Insurance Reserve Funds29
Deposits and Currency9
Other Financial Assets3
Other tangible6
Real Estate32
Source Source Federal Reserve Flow of Funds /
November 2007
52
Human capital is the largest asset class.
53
2007 Human Capital
Financial Assets26
Human and SocialCapital74
54

• Innovation has nothing to do with how many RD
  dollars you have. When Apple came up with the
  Mac, IBM was spending at least 100 times more on
  RD. It's about the people you have and how
  you're led.
• Steve Jobs

55
Per Capita GDP
1960
Singapore
1,900
Jamaica
1,900
Source IFS, WEO in 2007 USD
56
Human capital is required for increased
productivity. It has two key componentsEducatio
n Health
57
Skilled and Unskilled Jobs
1950
Today
65 Skilled
60 Unskilled
20 Semi-skilled
20 Skilled
20 Semi-skilled
15 Unskilled
58
Education and Wage DisparityAnnual Earnings
Professional Degree
117,033
Bachelors Degree
58,866
Some College, No Degree
38,284
High-SchoolDiploma
33,419
Less Than HS Diploma
24,721
Source BMO and US Census Bureau / 10-08 update
59
Average Annual Earnings Compared to High School
Graduates
3.0X
Advanced Degree
2.5X
Bachelors Degree
2.0X
1.5X
Some College
1.0X
High School Graduates
No High School Degree
0.5X
75
78
84
87
90
93
99
02
05
96
81
Sources BMO and US Census Bureau
60
How 15-Year-Olds Score in Math

• South Korea 550
• Japan 547
• Canada 529
• France 519
• Germany 513
• OECD average 500
• United States 477

Source OECD Programme for International Student
Assessment 2003
61
There are 600 million children in India and China
whose future buying power will grow at least as
fast as their rapidly improving educations.
62
U.S. Reading Skills in Urban Districts of 4th
Graders Below Basic Levels
District of Columbia 61
Los Angeles 61
Cleveland 59
Chicago 56
Atlanta 52
Houston 51
Central City avg 47
New York City 43
National Public avg 34
70
50
30
10
Source NAEP/Trial Urban District Assessment 2007
63
California High-School Exit Exam

• Improve student achievement in high school.
• Ensure that students who graduate from high
  school can demonstrate grade-level competency in
  reading, writing and mathematics.

Source California Department of Education
64
California High-School Exit Exam

• Show proficiency in 8th grade math
• 55 qualifies as passing (High F)
• Show proficiency 10th grade English
• 60 qualifies as passing (Low D)

This is essentially a middle-school exam.
65
California State University Freshman Who Need
Remediation (2005)
Requirements

• Took required college preparatory courses
• Entering GPA of 3.0 or higher

Despite these requirements

• 45 need English remediation
• 36 need Math remediation

Source California State University System, 2006
66
We must not be scared of competition.
We must be ready to compete.
67
Eddie The Eagle Edwards

• 1988 Calgary Olympics
• Britains first (and last!) ski jumper
• Last place finish with a jump of 253 feet

Matti Nykanen of Finland wins the gold with a
jump of 412 feet.
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Eddie The Eagle Edwards

• 1988 Calgary Olympics
• Britains first (and last!) ski jumper
• Last place finish with a jump of 253 feet

Eddie The Eagle Rule Olympic qualifiers must
compete in international events and place in the
Top 30 percent or Top 50 competitors.
69
Return on Human Capital Investment
The rate of return to a dollar investment made
while a person is young is higher than the rate
of return to the same dollar made at a later age.
Preschool Programs
Nobel Prize Economist James Heckman
Return
School
Opportunity Cost of Funds
Job Training
Age
Source James Heckman, University of Chicago
70
Big gaps in educational attainment are present
by age 5. Some children are bathed in an
atmosphere that promotes human capital
development, and, increasingly, more are
not. By 5, it is possible to predict with
depressing accuracy, who will complete high
school and who wont.
James HeckmanNobel Prize in Economics
Source New York Times July 29, 2008
71
Spending on Early-Childhood andPost-Secondary
Education
Early Childhood Post-Secondary Education Educati
on
U.S. 3,900 14,200 China 6,000 -
10,000 1,200 - 1,500
Source Knowledge Universe Education
72
The most important determinant for high
achievement in mathematical achievement in school
was readiness to learn when children entered
kindergarten. These results suggest that more
emphasis be given to the pre-school years, even
if this requires re-allocation of resources from
formal schooling.
Victor Fuchs Economist Stanford University
73
Knowledge Universe Education

• Advanced technologies
• Proven teaching methods
• Physical locations and online access
• People from every nation can learn anywhere and
  anytime

74
Knowledge Universe
75

• A new 140,000-square-foot Life Connections
  facility for early childhood care and employees
  services
• All workers get equal access to corporate early
  childhood education benefits

76
Knowledge UniverseSingapore
77
Investment in EducationWorld Returns
30
20
PRIVATE
SOCIAL
10
Primary
Secondary
Higher
Source George Psacharopolos Harry Anthony
Patrinos, World Bank Working Paper 2881 / 2002
78
Human capital is required for increased
productivity. It has two key componentsEducatio
n Health
79
Lifestyle Makes a Difference
70 of health-care spending about 1.5 trillion
is spent on lifestyle-related diseases.
U.S. Economy13.84 trillion
Date September 22, 2008
80
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Who told you to smoke?
Hall of Fame baseball players
82
Who told you to smoke?
Ann Sheridan
Barbara Stanwyck
Joan Crawford
Famous actresses
83
Who told you to smoke?
Soldiers and sailors
84
Who told you to smoke?
Doctors
85
Who told you to smoke?
and dentists.
86
Who told you to smoke?
Even scientific researchers!
87
Its no wonder young people still smoke.
88
Who has NOT been used in cigarette advertisements
to get you to smoke?

• Babies
• Santa Claus
• Supreme court justices
• U.S. Presidents

89
Who told you to smoke?
Your baby
90
Who told you to smoke?
U.S. Presidents
91
Who told you to smoke?
Santa Claus!!
92
Who has NOT been used in cigarette advertisements
to get you to smoke?

• Babies
• Santa Claus
• Supreme court justices
• U.S. Presidents

93
There is a staggering cost for failing to
contain the containable.
94
Chronic Disease Study

• Diabetes
• Heart disease
• Hypertension
• Stroke

• Cancers
• Pulmonary conditions
• Mental disorders

95
Obesity Rates U.S. vs. World
2002
MEN
36.5
U.S.
2005
41.8
WOMEN
24.0
Mexico
34.3
21.6
U.K.
24.2
20.9
Germany
20.4
7.8
France
6.6
1.6
China
1.9
1.8
Japan
1.5
Source World Health Organization / Estimated
obesity rates for people aged 15 years and older
/ 2005
96
Physical Inactivity
26 of U.S. children ages 8-16 watch TV four or
more hours a day.
29 of U.S. high school students participate in
physical education classes
97
An average 9-year-old boy who spends his free
time on the playground needs about 2,400 calories
a day. However, if that same boy spends his time
in a chair playing video games, his recommended
caloric intake drops to

• 1,200
• 1,500
• 1,800
• 2,000

98
Obese U.S. Children Ages 6 to 11
9M
6M
3M
Today
1970s
Source Institute of Medicine
99
Obese U.S. Children Ages 6 to 11
As a result, there has been a ten-fold
increasein type-2 diabetes inchildren in just
10 years.
Source Institute of Medicine
100
Japans Effort to Reduce Obesity

• Goal Reduce overweight population by 10 over
  four years 25 over seven years
• Strategy Measure the waistlines of every person
  between the ages of 40 and 74 provide dietary
  guidance as needed.
• Noncompliance Impose financial penalties on
  companies and local governments that fail to meet
  specific targets.

Source New York Times / 6-13-08
101
Economic Value of Eliminating Deaths in the
United States
72T
75T
58T
53T
50
2 0 0 7 U.S. B A L A N C E S H E E T
C A N C E R
H E A R T D I S E A S E
25
8T
8T
AIDS
STROKE
Source Kevin M. Murphy and Robert H.
Topel/University of Chicago
102
The Nature of Credit

• Credit is what counts, not leverage.
• Most loans to real estate are not
  investment-grade.
• Interest rates are volatile and unpredictable.
• Rating is not credit.
• Sovereign debt is historically risky.
• Debt values underpin all capital markets

103
The recent run-up of home prices was extraordinary
Sources Robert Shiller, Milken Institute.
104
Home prices dont go up foreverChange in home
prices in 100-plus years
Sources Robert Shiller, Milken Institute.
105
If you bought your house
One year ago
Five years ago
change in price, June 07-08
change in price, June 03-08
Sources SP/Case-Shiller, Milken Institute.
106
Any loan to real estate is a good loan
107
Imperial Palace (Tokyo)
Residential Property (California)
1990US5.1 trillion
1990US2.4 trillion
108
Sub-Prime Mortgages Weve Been There Before
109
The Mortgage Problem in Perspective
80 million houses
27 million are paid off
53 million have mortgages
48 million are paying on time
This compares to 50 seriously delinquent in the
1930s.
5 million are behind
(9.2 of 53 million with 2.8 in foreclosure)
Sources U.S. Treasury, Milken Institute.
110

• 1970 In the first 70 years of the 20th century,
  AA-rated railroads have had more than double the
  default rate of single-B rated industrials.
• Today Many AAA-rated mortgage portfolios will
  have a higher default rate than single-B rated
  industrials.

111

• Microsoft
• ADP
• Exxon-Mobil
• Johnson Johnson
• Toyota
• SMRT Corp.
• Imperial Oil
• GE
• Pfizer

1,295 AAA financial instruments created in 2007
Source Standard Poors Bloomberg
112
Sovereign Debt Has Long Been Suspect
When national debts have once been
accumulated to a certain degree, there is scarce,
I believe, a single instance of their having been
fairly and completely paid. Adam Smith (quoted
in the CLSA report Asia at Equilibrium
113
Secondary Market Pricesof Third-World Debt
Cents on the dollar
100
80
70
60
50
40
30
20
1982
1983
1984
1985
1986
1987
1988
1989
114
Venezuelas Sovereign Debt Rating
SP Credit Rating
AAA
AA
A
A-
BBB
BB
BB-
B
CCC
1977
1982
1987
1992
1997
2002
2007
115
Sovereign Loans Historically the Riskiest Debt
Argentinas Defaults 1830 1890 1915 1930s 1982 200
1
116
1974
The most important yearin financial
historysince World War II.
117
1974

• Interest rates double in one year highest level
  in recent recorded U.S. history
• Regulation restricts lending
• Energy prices skyrocket
• U.S. stock market plunges 50
• Unemployment almost doubles

118
1974
RESULTCompanies with the highest returns on
capital, fastest rates of growth in market share
and employment, and greatest innovation were
denied access to equity and debt capital.
119
U.S. Stock Market in 1974
100
90
80
70
60
Jan 74
Apr 74
Jul 74
Oct 74
Jan 75
Source Bloomberg (updated October 15, 2008).
120
Education and the extent to which countries are
able to upgrade the skills and training of the
labor force have acquired growing importance as
indicators of a countrys future growth
potential.
Source World Economic Forums Global
Competitiveness Report 2005-2006
121
Education is the Answer
122
We are creating a legacy for the next generation.
123

• Far and away the best prize that life offers is
  the chance to work hard at work worth doing.
• Theodore Roosevelt26th U.S. President

124
A Global Perspective for Early Care and Education
2008 Fall Forum Current Emerging Trends for
Early Care and Education in 2009SacramentoOctobe
r 21, 2008 Michael MilkenChairman, Milken
Institute